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Judgment
Sinha D.D., J.—Rule, made returnable forthwith by the consent of respective parties. Heard Mr. S.P. Dharmadhikari, Senior Counsel for petitioner and Mr. Raghuvanshi, Additional Solicitor General of India.
Mr. S.P. Dharmadhikari, Senior Counsel for petitioner has submitted that the petitioner is a company duly registered under the Companies Act, 1956 and is engaged in the business of manufacturing machine tools. Similarly, respondent No. 4 is a foreign company registered in the United States of America and is also engaged in manufacturing of equipment similar to that of petitioner. On 10.10.2005 a tender came to be floated by respondent No. 3 on behalf of respondent No. 1-Government of India for supply of one three-roller, four axis CNC Flow Forming Machine, which is required by the Ministry of Defence.
Though the tender notice stipulated that the technical bids would be opened on 18.11.2005, the date of opening of technical bid was deferred from time to time and eventually, the tender came to be opened on 10.2.2006.
On 17.8.2006, the Tender Evaluation Committee of respondent No. 3 assessed the tenders submitted by petitioner as well as respondent No. 4 as both were technically qualified for opening of their respective price bids.
On 13.10.2006, the price bids were opened and petitioner was found to be the lowest bidder with the quoted price of Rs. 18,49,13,681/-. Respondent No. 4, being a foreign Company, quoted its price in US dollars i.e. $ 3169320; on conversion in Indian rupees (as per the prevalent price of the dollar) amount came to Rs. 20,09,70,715/-.
On 23.7.2007, the Tender Purchase Committee of respondent No. 3 decided to call upon the petitioner company for price negotiation. The negotiations with petitioner were held and thereafter the Tender Purchase Committee decided to recommend name of petitioner company for awarding the contract. However, without assigning any reason, respondent Nos. 2 and 3 have decided to award the contract to respondent No. 4 find therefore, have issued Letter of Intent to that effect on the ground that, on the date of award of the contract, rate of US dollar had fallen down vis-a-vis Indian rupee and because of that, respondent No. 4 had become lowest bidder. The learned Senior Counsel has submitted that, the decision of respondent Nos. 2 and 3 to award the contract to respondent No. 4 being illegal and in violation of directions of Ministry of Finance from time to time, is not sustainable in law and hence, present petition is filed seeking declaration that the decision of respondent No. 2 and respondent No. 3 of awarding contract under tender dt. 10.10.2005 to respondent No. 4 is illegal, arbitrary and therefore, unsustainable in law and is liable to be quashed and set aside.
Petitioner, in the alternative, has prayed for declaration that the Circular dt. 30.7.1992, in so far as it relates to the procedure of evaluation of foreign currency bids in case the time lag between the date of opening of the price bid and final evaluation of bids is longer than three months, is ultra vires to the Constitution. It is contended that the circular of Ministry of Finance of 1997 is latter in point of time and hence, shall govern the field and was binding on the respondent. The respondent should have acted as per the terms and conditions of the Circular of 1997 and not as per the procedure'' laid down in the Circular of 1992. Since the decision taken by the respondent is based on the terms and conditions of the Circular of 1992, for the reasons stated hereinabove, the same being illegal, cannot be sustained in law.
Mr. S.P. Dharmadhikari, Senior Counsel has submitted that the challenge raised by the petitioner in respect of decision taken by the respondent to award the contract to respondent No. 4 is based on the following grounds:
i) Conversion rate of dollar on the date of opening of price bid was required to be taken into account. In order to support this, petitioner relied on the following documents:
a) Office Memorandum dated 13.2.1997 issued by the Ministry of Finance, Department of Economic Affairs.
b) Manual of policy and procedure for procurement of goods issued by Ministry of Finance, Department of Expenditure.
ii) Petitioner being L-1 on the date of opening of the price bid, petitioner ought to have called upon to match the evaluated value of the bid of respondent No. 4 after 28.8.2007 i.e. the date on which the alleged evaluation took place.
Mr. S.P. Dharmadhikari, Senior Counsel for petitioner has submitted that the Circulars issued in the year 1988 and 1992 provide that conversion of foreign currency bid into Indian rupee is required to be done, taking into account the BC Selling rate of State Bank of India on the date of opening of price bids. These circulars further provide that in case the time lag between the date of opening the price bid and final evaluation of the bids is longer than three months, then in that case the BC Selling rate of State Bank of India prevailing on the date of final evaluation of bids could be adopted for converting bids received in different currencies into Indian rupee. It is contended that since the circulars are not applicable, therefore, decision of respondents in awarding contract to respondent No. 4 based on the terms and conditions of these circulars obviously cannot be sustained in law.
Learned Senior Counsel for petitioner has further submitted that, on 31st August, 2006, the Government of India published a Manual titled as Policies and Procedures for purchase of goods. It is submitted that Clause 11.5 provides that if the offers are received in different currencies, it needs to be converted into single currency for evaluation of offers. Said clause also stipulates that the offers received in different currencies are to be converted into Indian Rupees as per selling exchange rates published by Competent Authority like RBI/SBI prevailing on a particular date to be specified in the tender notice/enquiry. It is contended that, according to Clause 11.5, generally the said date should be the date of opening of tender. It is further contended that even 1997 circular provides for the same procedure. It is contended that Clause 11.5 of the Manual of 2006 and circular of 1997 are subsequent in point of time and, by necessary implication, the same supersede the Circulars dt. 1988 and 1992 issued by the Finance Department and therefore, earlier circular lost its efficacy. Consequently, the procedure stipulated therein should not have been followed by the respondents while taking a decision to award the contract. Counsel for petitioner has further submitted that the tender notice issued by the respondents was vague arid uncertain and therefore, the respondents themselves were not certain about the stipulations thereof, and hence, the respondents sought clarification from various authorities on this aspect. It is contended that, if the authorities themselves were not certain, the bidders were also confused because of 1988, 1992, 1997 and 2006 circulars, which has deprived the bidders a level playing field. In order to substantiate this contention, reliance was placed on the decision of the Apex Court reported in Reliance Energy Limited and Another Vs. Maharashtra State Road Development Corporation Ltd. and Others,
It is contended that, as per Clause 5.5 of the tender document, the bidder, who has submitted bid in the currency other than the Indian rupee, was required to give rupee equivalent indicating the exchange rate adopted. This was obviously to bind the foreign bidders to the exchange rate disclosed by him. Though this requirement was mandatory, neither respondent No. 4, who has chosen to remain absent, nor the Government has disclosed whether respondent No. 4 has fulfilled the condition stipulated in Clause 5.5 of the tender document. This means that the Government would be required to pay at the rate prevailing on the date of payment and not at the rate at which the tender was awarded. This would result in paying respondent No. 4 much higher amount than what was agreed upon if the exchange rate of dollar goes up which will further result in defeating public purpose and would also impose burden on the Public Exchequer.
Mr. S.P. Dharmadhikari, Advocate for petitioner, therefore, has contended that the decision of respondents 1 to 3 of awarding contract to respondent No. 4, is arbitrary, unjust, illegal and is liable to be set aside,
Mr. Raghuvanshi, Additional Solicitor General has contended that the Circular dt. 1992 is neither superseded nor repealed by the subsequent Circular as contended by the Senior Counsel for petitioner. It is submitted that the Circular of 1992 contemplates two situations namely:
a) Conversion of foreign currencies into Indian rupee is required to be done taking into account the BC selling rate of State Bank of India on the date of opening of price bids.
b) If there is a time lag of more than three months between the date of opening of price bids and the final evaluation of bids, then conversion rate of foreign currency in Indian rupee should be based on BC selling rate of State Bank of India prevalent on the date of final evaluation of bids.
Similarly, the Circular of 1997 is in relation to the earlier Circular of 1988 issued by the same Ministry and is not in relation to Circular of 1992, which is evident from the opening line of circular of 1997, which reads thus:
With reference to the Ministry of Finance (Department of Economic Affairs), Office Memorandum No. 4(5)/FEB/88, dt. 28.12.1988 on the subject cited above, the under signed....
The Additional Solicitor General, therefore, has submitted that the circular of 1997 did not supersede the circular of 1992 nor of circular of 1988. It is contended that the circular of 1997 contemplates that conversion of foreign currency bids will be done after taking into consideration the BC Selling rate of State Bank of India on the date of opening of price bids. The circular of 1997 is completely silent regarding the procedure when there is a time lag of more than three months between the date of opening of price bids and date of final evaluation of bids and therefore, the circular of 1997 does not either supersede the provisions of 1992 circular in this regard nor render them nugatory. Circular of 1992 continues to hold field on these issues which are not covered by the circular of 19971. The Additional Solicitor General has further Submitted that the circular of 1997 is clarificatory in nature and does not override the circular of 1992 merely because it is latter in point of time. It is contended that both these circulars through are holding the field; however, are required to be read harmoniously as either of them is in conflict with each other. Both these circulars supplement each other and cover different fields and contingencies.
The Additional Solicitor General has contended that the Ministry of Defence had sought clarification from the Ministry of Finance regarding the circulars. The Ministry of Finance has opined that the Circular of 1997 does not override the circular of 1992. Both the circulars are required to be read harmoniously.
The learned Additional Solicitor General has further contended that the Manual on Policies and Procedures for purchase of goods was issued on 31.8.2006 i.e. much after floating of tender, which was on 10.10.2005. It is contended that Clause 11.5 of the Manual though stipulates that conversion of any other currency into Indian rupee should be done as per the exchange selling rate on a particular day to be specified in the tender enquiry, generally the date of opening of tender; however, the word used in Clause 11.5 is "generally" and it does not prohibit respondents to follow the procedure mentioned in 1982 circular in case there is a time lag of more than three months between the date of opening the price bids and the date of final evaluation of bids and therefore, the contention canvassed by Counsel for petitioner in this regard suffers from lack of merits.
The Additional Solicitor General of India has further submitted that Clause 5.5 of the tender document gives freedom to the tenderer to submit a bid in currency other than Indian rupee. Plain reading of the said clause indicates that the date of evaluation and date of payment are two different dates and therefore, the successful bidder might be the lowest on the date of evaluation of bid when the currency other than Indian rupee is converted into Indian rupee, the bid may go up in view of rise in BC selling rate at latter point of time, which is immaterial, since the tender process by then is already completed by identifying successful bidder as per the terms of the tender document. It is submitted that the date of evaluation of bid is the date for identifying the lowest and suitable bidder whereas the date of payment for the work done under the contract is always subsequent to awarding of contract and therefore, the contention canvassed by Counsel for petitioner in this regard is not only hypothetical but same is also inconsistent with the terms and conditions of the tender document.
The Additional Solicitor General has contended that Clause 13 of the tender document clearly specifies that respondent Nos. 1 to 3 are not bound to accept the lowest tenderer and reserve right to accept the tender in whole or in part. It is further submitted that petitioner was called for negotiation on 19.7.2007 as the price quoted by petitioner was on the higher side. That was the price negotiation meeting and not a meeting for evaluating the price bid of tenderers.
It is contended that the petitioner having accepted the terms and conditions of the tender, it is not open for the petitioner to either criticize them or question validity thereof.
Mr. Raghuvanshi, Additional Solicitor General has further submitted that even if it is assumed without admitting that the date of evaluation was 19.7.2007 as has been alleged by the Counsel for petitioner is accepted, however, since the date of opening of price bid was 13.10.2006, it was beyond three months from the date of opening of price bid i.e. 13.10.2006. Hence, in any case, the provisions of circular of 1992 were attracted and therefore, the decision to award the contract to respondent No. 4 being consistent with the said procedure, is sustainable in law.
The Additional Solicitor General lastly submitted that the petitioner participated in the process of tender which was commenced from 10.10.2005; the petitioner offered a discount of Rs. 55 Lacs on the cost of machine on the amount already quoted by him. However, on evaluation of tender, since respondent Nos. 1 to 3 found respondent No. 4 more suitable for the contract, petitioner is making grievance against the tender process undertaken by respondents as well as circulars of 1992 and 1997. The petition suffers from lack of merits, hence, the same is liable to be dismissed.
The Additional Solicitor General has contended that the tender process was initiated in the year 2005; the contract was awarded in the year 2007; delivery of machine is to take place on 30.6.2009; petitioner filed a petition in February, 2008 and therefore, same needs to be dismissed on the ground of delay itself.
We have considered the rival contentions canvassed by the learned respective Counsel. In the instant case, the facts are more or less not in dispute. Considering the grievance made by the petitioner as well as the stand taken by respondents, the questions which arise for our consideration are as follows:
Whether the respondents were justified in taking decision of awarding contract to respondent No. 4 on the basis of circulars of 1988 and 1992 ?
Whether the circulars of 1997 issued by the Ministry of Finance, Department of Expenditure as well as the Manual published by the Government of India on 31.8.2006 titled as Policies and Procedures for purchase of goods overrides the circulars of 1988 and 1992 ?
Before we consider the issues in question, it will be appropriate to consider the text of office memorandum/circular dt. 28.12.1988 as well as 30.7.1992. The relevant portion of Office Memorandum of 1988 reads thus:
Subject : Evaluation of Tender Bids - Discount and Exchange. Rates to be adopted.
As per the existing practice, all financial packages, whether they contain soft, commercial or a mix of soft and commercial credit are converted into Rupees from the respective currencies and discounted at a uniform rate of 10 % for comparative evaluation of the bids. In accordance with office memorandum F. No. 5 (3) FEB-1/79, dated 15th June, 1979 of the Department of Economic Affairs, Ministry of Finance, the conversion of foreign currencies into Rupees is done taking into account the BC selling rate of State Bank of India on the date of opening the price bid or the rate obtained closer to the date of award of contract, in case there is a significant time lag between the opening of price bid and award of contract.
Paras 2 to 5....
In the case of time lag between the date of opening the price bid and final evaluation of the bid is longer than three months, then for evaluation of price bids;
i) the notified discount ratio prevailing on the date of evaluation will be taken into account for purposes of evaluation of credit packages.
ii) The BC Selling rate of State Bank of India prevailing on the date of final evaluation of the bid will be adopted for converting the various currencies into domestic currency.
Similarly, the relevant portion of Office Memorandum of 1992 reads thus:
Subject : Evaluation of Tender Bids - Discount and Exchange. Rates to be adopted.
The relevant portion is as under : "In case time lag between the date of opening of the price bids in final evaluation of bids is longer than three months, then for evaluation of price bids ;
i) The notified discount rate prevailing on the date of evaluation will be taken into account for purposes of evaluation of credit packages;
ii) The BC selling rate of State Bank of India prevailing on the date of final evaluation of the bid will be adopted for converting the various currencies into domestic currency.
Similarly, the relevant portion of Office memorandum/circular dt. 13.2.1997 reads thus:
The procedure for conversion of foreign currency bids will, however, remain unchanged. Such conversion of foreign currencies into rupee is to be done taking into account the BC selling rate of State Bank of India on the date of opening of price bids.
Clause 11.5 of 2006 Manual reads thus:
Clause 11.5 : Conversion of Currencies : If offers have been received containing different currencies (as in the case of purchasing imported goods), all the quoted prices (with different currencies) are to be converted into a single currency for evaluation and comparison of offers on equitable basis. For this purpose, all such quoted prices are to be converted into Indian rupees, as per the selling exchange rates established by a Competent Authority (like RBI/SBI) as prevailing on a particular date to be specified in the tender enquiry. Generally, this date is the date of tender opening.
Plain reading of Clause 6 of 1988 circular shows that in the case of time lag between the date of opening the price bid and final evaluation of the bid is longer than three months, then the BC Selling rate of State Bank of India prevailing on the date of final evaluation of the price bid required to be adopted by the respondent Nos. 1 to 3 for converting the various currencies into domestic currency. Similarly, the procedure is stipulated for converting various currencies into domestic currencies in case of time lag between the date of opening of price bids and final evaluation of bids is longer than three months as stipulated in 1992 circular. The relevant clauses in both these circulars make it explicitly clear that in case of time lag between the date of opening of price bid and final evaluation of bids is longer than three months, then for evaluation of price bids the BC selling rates of State Bank of India prevailing on the date of final evaluation of bids is required to be adopted by the Authorities for converting various currencies into domestic currencies. In the instant case, it is no doubt true that the price bids were opened on 13.10.2006 and the petitioner was the lowest bidder on that date, however, final evaluation of bids took place on 28.12.2007 which was admittedly much beyond the period of three months from the opening of price bids and therefore, as per the procedure stipulated in this regard in the circulars of 1998 as well as 1992, the BC Selling rate of State Bank of India prevalent on 28.12.2007 was required to be adopted by the respondents for converting dollars into Indian rupee. It is not in dispute that after adopting the said procedure respondent No. 4 became a lowest bidder and therefore, respondent Nos. 1 to 3 decided to award a contract.
It is no doubt true that Clause 5 of circular of 1997 contemplates that the procedure for converting the foreign currency into Indian rupee should be based on BC Selling rate of the State Bank of India on the date of opening of the price bid. However, the said clause is completely silent in respect of the situation where the time lag between the date of opening of price bid and date of final evaluation of price bid is more than three months. It is to be noted that the subject mentioned in all these circulars reads thus:
Evaluation of Tender Bids - Discount and Exchange. Rates to be adopted.
Similarly, the text of first clause of 1988 circular stipulates that conversion of foreign currency into Indian rupee is done taking into account the BC selling rate of State Bank of India on the date of opening the price bid or the rate obtained closer to the date of award of contract in case there is significant time lag between opening of price bid and awarding of contract. The combined reading of all these circulars would show that when there is a significant time lag between opening of price bid and awarding of contract, in that event, the procedure stipulated in 1988 and 1992 circulars is attracted and is required to be followed by the authorities while converting the foreign currency into domestic one, otherwise, the procedure for conversion of foreign currency into Indian rupee stipulated in the circular of 1997 is attracted. We want to express that all these circulars deal with the procedure to be adopted while evaluating the Tender Bids Discount and while fixing the exchange rate. It is, therefore, evident that the respondents have to evaluate the price bids after opening of the price bids and in case of time lag between the date of opening of price bid and final evaluation of bids is longer than three months than the provisions of circular of 1988 as well as 1992 is attracted and the BC Selling rate of State Bank of India prevalent on the date of final evaluation of bid will be the basis for converting the foreign currency into domestic one. However, if the time lag is less than three months, in that event, the procedure contemplated in this regard, stipulated in 1997 circular needs to be followed. It is no doubt true that there is no mention in the tender document regarding the date on which the respondents were required to evaluate the price bids after they are opened. However, it is expected that such evaluation of price bids in the normal course must be done at the earliest, but, in case, for adequate reasons, if there is a substantial delay of more than three months from the date of opening of price bids and date of evaluating the same, in that event, in order to serve the public purpose, the respondents are required to adopt the procedure for fixing the conversion rate prevalent on the date of final evaluation of price bids. For example, on the date of opening of price bids, if the rate of conversion of dollar into Indian rupees is Rs. 50/-and the bidder who had submitted tender in US currency is L-l on that date; however, the award of contract is based on final evaluation of price bids submitted by tenderers and if the final evaluation of price bid for some reason is delayed beyond the period of three months, in that event, the price of dollar vis-a-vis Indian rupee goes up and due to such escalation, the foreign bidder though may no longer remain L-1 tenderer, even then he will have to be treated as L-l tenderer and will be eligible to get the contract which undoubtedly would result in causing loss to the Public Exchequer and affect the public interest. Hence the procedure mentioned in the circulars of 1988 and 1992 is just and fair and serves the public purpose.
So far as the challenge raised by petitioner on the ground of Article 14 of the Constitution of India is concerned, it is necessary to keep in mind that mere classification is not enough to attract vice of Article 14, unless such classification is arbitrary and irrational. The classification must be founded on intelligible differentia which distinguishes those who are grouped together from the others and that differentia must have a rational relation to the object sought to be achieved by the circular or the statute. In the instant case, as we have already observed hereinabove, the circulars of 1988 and 1992 are attracted in cases of delay caused in evaluating the price bid is more than three months, hence, the classification is founded on an intelligible differentia which also has rational to the object to be achieved by the said circulars.
The circular of 1997 is attracted in different set of cases and in altogether different situation. It is to be noted that law can make and set apart classes according to needs and exigencies. However, the classification should not be arbitrary, artificial or evasive. It must always rest on real and substantial distinction that has a reasonable and just relation with the classification that is made. In the instant case, we are of the view that the action of respondents is not violative of Article 14 of the Constitution of India.
In the instant case, we cannot ignore the fact that the process of tender was commenced in the year 2005 and the contract was awarded in the year 2007 and delivery of machine was due on 30.6.2009. We also cannot ignore that the tenders were floated by Ministry of Defence for the purpose of procuring machines in the year 2005, delivery of which is due on 30.6.2009. The petitioner submitted his bid with open eyes on 10.2.2006; petitioner was also called for negotiation and gave a discount. It is, therefore, evident that the petitioner was fully aware about the procedure applicable and required to be adopted by the respondents and at no point of time raised any grievance in this regard till decision is taken by respondent Nos. 1 to 3 to award the contract to respondent No. 4 in the year 2007. It is only after awarding of contract by respondent Nos. 1 to 3 to respondent No. 4 in the year 2007, for the first time, the petitioner invoked jurisdiction u/s 226 of the Constitution by filing present petition in the month of February, 2008. It is in such a situation that the delay in approaching this Court is fatal to the petitioner apart from the fact that it is an after thought.
For the reasons stated hereinabove, we answer question No. 1 in affirmative whereas question No. 2 in negative. The petition suffers from lack of merits. Hence, the same is dismissed. No order as to costs.
Before we part with the judgment, we want to express that it is undoubtedly a jurisdiction and domain of the Government as well as instrumentalities of the Government to evolve proper and appropriate procedure and formulate such terms and conditions which will enable them to choose the most suitable and efficient contractor for the job under the tender. At the same time, the procedure as well as conditions of tender must be just, fair, unambiguous and transparent so that the tenderers should not have any difficulty while submitting the tender. We would like to express that if the process of tender is regulated by Government circulars or office memorandums, care should be taken to avoid application of such terms and conditions of such circulars which are overlapping and result in creating confusion in the mind of tenderer, though the tenderer can always seek classification in this regard from the authorities concerned. Similarly, in case of public contract, public interest should always be a predominant consideration and the action of the Authorities must always be bona fide and should save the public interest.